Bank Holding Company

The de novo bank can be established with or without a bank holding company. While the existence of a one-bank or multi-bank holding company can greatly increase the flexibility of the de novo financial institution, this flexibility does come at a price. On the positive side, the holding company structure allows the bank to participate in non-traditional banking activities, i.e., business other than taking deposits and making commercial loans. For example, the institution may sell mutual funds, insurance, or underwrite specific securities. A holding company may also borrow money, through the issuance of bonds or other vehicles, and push that capital down to the bank; the bank then enjoys greater financial backing to support business expansion and leverage of its capabilities. Repayments of that borrowed capital are typically structured as dividends from the bank to the holding company.

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